Recently, someone in the fan group asked me how to trade perpetual contracts, so I thought I’d just write something to explain this topic thoroughly.

Let’s start with the basics. Perpetual contracts are essentially an upgraded version of futures. Traditional futures have an expiration date, but perpetual contracts are different: they have no delivery time. You can hold your position indefinitely, closing it whenever you want. That’s also why, in global crypto trading markets, nearly 75% of trading volume happens in perpetual contracts—because this instrument is indeed more flexible.

So what’s the core logic behind perpetual contracts? They’re priced in stablecoins, such as USDT, which makes trading very straightforward. Then, through a funding rate mechanism, the contract price is kept close to the spot price most of the time, without deviating too far. You only need to put up a portion of the margin to open a position, and leverage is typically adjustable between 10 and 125 times—meaning both your profits and your risks are amplified.

One particularly special thing about perpetual contracts is T+0 trading, operating 7×24 hours, all year round, so you can enter the market whenever you want. The mark price mechanism is also important: it references indices from multiple exchanges to calculate the price, with the goal of preventing a single market from being manipulated. There’s also an insurance fund and an auto-deleveraging mechanism—these two things help protect the market from collapsing during extreme conditions.

So how do you trade perpetual contracts? The most common approach is trend trading: if you’re bullish, go long; if you’re bearish, go short, using technical analysis or macro analysis to make your judgment. There’s also hedging arbitrage—holding opposite positions in spot and contracts—which can lock in risk or profit from the price spread. If you notice the funding rate is especially high, short positions can earn that funding rate. Conversely, when the rate is negative, holding long positions becomes more cost-effective.

But the risks here must be explained clearly too. The most common mistake beginners make is using leverage that’s too high. I advise new traders not to exceed 5x, because even small price fluctuations can lead to liquidation. Position management is also crucial—never go all-in; leave room for a stop-loss and for adding to your position. If you’re holding long term, keep an eye on the funding rate, especially in a sideways market, where funding rate costs will be very noticeable.

Extreme conditions like “needle” moves and sudden crashes are most likely to trigger liquidation, and different platforms have different margin ratios, liquidation mechanisms, and auto-deleveraging rules—so you must research them in advance. The final risk is mindset. Perpetual contracts are essentially a zero-sum game, and emotional adding to positions is a common cause of liquidation. I’ve seen too many people fall into this trap.

All in all, perpetual contracts are a double-edged sword. If you use them correctly, you can amplify returns and hedge flexibly; if you use them poorly, it’s the fastest road to going to zero. My advice for beginners is to start with a small position and low leverage, and first learn how to control losses. Experienced traders can combine technical analysis and macro analysis. Long-term players should build their own trading system and stick to regular review and reflection.

When you trade perpetual contracts, what leverage do you usually use? Have you ever experienced liquidation? Chat with us in the comments.